Egypt's ousted President Hosni Mubarak looks on as he reacts inside a dock at the police academy on the outskirts of Cairo, May 21, 2014. An Egyptian court on Wednesday sentenced Hosni Mubarak to three years in prison on charges of stealing public funds. [Photo/Agencies]

A Cairo court convicted ousted Egyptian President Hosni Mubarak of embezzlement on Wednesday, sentencing him to three years in prison.

The graft case against the 86-year-old Mubarak, who is kept in custody at a military hospital, is one of two against the former president who was ousted in a popular uprising in 2011 after nearly three decades in power. He is being retried over the killings of hundreds of protesters during the uprising.

Mubarak's two sons, one-time heir apparent Gamal and wealthy businessman Alaa, were also convicted of graft in the same case on Wednesday and sentenced to four years each in prison.

The three Mubaraks were found guilty of embezzling millions of dollars' worth of state funds over a decade toward the end of Hosni Mubarak's rule. The funds were meant for renovating and maintaining presidential palaces but were instead spent on upgrading the family's private residences.

Hosni Mubarak "had an obligation to restrain himself and his sons from stealing state funds ... but instead, he gave himself and his sons license to embezzle them", Judge Osama Shaheen said as he handed down the verdict.

The three Mubaraks were also fined 21.1 million Egyptian pounds ($2.9 million) and ordered to reimburse 125 million Egyptian pounds to the state treasury. They have the right to appeal their convictions before a higher court.

The Mubaraks had returned around 120 million Egyptian pounds to the state in connection with this case, but the proceedings against them continued. Four other defendants in the case were acquitted.

Mubarak, who turned 86 this month, attended Wednesday's hearing in a suit and tie. His two sons wore white prison uniforms.

They have all been held in custody since 2011 but only time in custody in connection with this case - about a year since the embezzlement charges were raised - will be deducted from the sentences.

Under Egyptian law, maximum sentences for embezzlement vary depending on the nature of the crime, but prison sentences of 15 years are not uncommon.

Mubarak was found guilty in June 2012 of failing to stop the killing of more than 900 protesters during the 18-day revolt against his rule and sentenced to life imprisonment.

His conviction was overturned in January 2013. That decision was appealed by prosecutors, and a retrial began in April 2013. He was ordered released in August last year pending his graft trial, but was kept at a military hospital in a suburb south of Cairo. Given his poor health, Mubarak is likely to serve his sentence in the hospital.

Mubarak's sons are also being retried on separate graft charges.